Black v Lagoon Lodges Properties Limited - [2016] NZCA 127

IN THE COURT OF APPEAL OF NEW ZEALAND

CA77/2015
[2016] NZCA 127

BETWEEN

LESLIE ALLAN BLACK AND LESLEY ANN BLACK
First Appellants

IAN JAMES CLELAND AND MARILYN GAIL CLELAND
Second Appellants

MICHAEL JAMES FERGUSON AND TRACEY ANN FERGUSON
Third Appellants

GORDON DESMOND HANSEN AND IRENE DOROTHY HANSEN
Fourth Appellants

NEVILLE FREDERICK LUDEMANN AND ALISON JEANETTE LUDEMANN
Fifth Appellants

GREG ROBERT METHERELL AND KAREN MARGARET METHERELL
Sixth Appellants

GRANT JAMES NOLAN AND MAUREEN NOLAN
Seventh Appellants

BARRY JOHN SUMNER AND COLLEEN ANN SUMNER
Eighth Appellants

BARRIE JAMES THOMPSON AND JANET MARIE McIVER
Ninth Appellants

WARREN EDWARD WALKER AND JANINE MAREE WALKER
Tenth Appellants

GRAHAM JOHN WILLETS
Eleventh Appellant

GRAHAM JOHN PLUCK AND BEVERLY HELEN PLUCK
Twelfth Appellants

MURIEL ROSE GILMORE AND BARTON ELLIOT GILMORE
Thirteenth Appellants

AND

LAGOON LODGES PROPERTIES LIMITED
First Respondent

NEVILLE IAN CANT
Second Respondent

DOYLE FINANCIAL SERVICES LIMITED
Third Respondent

STEPHEN MURRAY DOYLE
Fourth Respondent

MDS LAW
Fifth Respondent

Hearing:	23 February 2016
Court:	Randerson, Miller and Cooper JJ
Counsel:	C R Carruthers QC and D M Lester for Appellant F B Barton and A M Cunninghame for Respondent
Judgment:	14 April 2016 at 11.30 am

JUDGMENT OF THE COURT

AThe appeal is allowed.
BThe cross-appeal is dismissed.
CThe appellants will have one set of costs as for a standard appeal on a band A basis.

____________________________________________________________________

REASONS OF THE COURT

(Given by Miller J)

Introduction

The appellants are investors who subscribed for shares in Lagoon Lodges Properties Ltd (Lagoon Lodges), Lagoon Lodges Properties Two Ltd (Lagoon Lodges Two) and Castaway Properties Ltd (Castaway). In separate proceedings they have sued those involved in making and implementing the offer of securities to them, alleging breaches of securities legislation.[1]
[1]This appeal and cross-appeal encompass all three proceedings.
The fifth respondent, MDS Law, were the solicitors to the issuers and to the second respondent, who was the director of each of the issuers. MDS Law admittedly held subscriptions on trust for investors pending the issue of securities. They have been sued in each proceeding on the ground that they are liable in tort, and in contract via the Contracts (Privity) Act 1982, and (now) for breach of trust. They have responded by seeking to strike out the claims against them, saying that they must fail on the facts pleaded and are inconsistent with their duties to their client and the structure of the securities legislation. In the High Court they succeeded in part, striking out (on limitation grounds) the claims so far as they relate to a portion of the subscriptions that was paid away more than six years before the proceeding was commenced.[2]
[2]Black v Lagoon Lodges Properties Ltd [2014] NZHC 3336 at [52]–[57]. The judgment was recalled on 22 January 2015 and errors relating to the date of commencement of the proceedings were amended. Justice Whata also took the opportunity to include the filing numbers of all three proceedings, though Lagoon Lodges Properties Two Ltd and Castaway Properties Ltd were not listed as defendants in either strike-out…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Keep reading for free

Create a free CaseChat account to read Black v Lagoon Lodges Properties Limited and more:

Read every judgment in full
Ask AI and get answers linked to paragraphs
See how each paragraph was cited in later cases
Download judgments as PDF or Word

Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details

Case: [2016] NZCA 127
Decision Date: 14 April 2016 at 11.30 am

CaseChat Overview and Summary

The appeal concerns a series of claims brought by investors who allege breaches of securities legislation in relation to their subscriptions for shares in Lagoon Lodges Properties Ltd, Lagoon Lodges Properties Two Ltd, and Castaway Properties Ltd. The investors have sued those involved in making and implementing the offer of securities, including MDS Law, the solicitors to the issuers. MDS Law has responded by seeking to strike out the claims against them, arguing that they must fail on the facts pleaded and are inconsistent with their duties to their client and the structure of the securities legislation. The High Court granted the strike-out application in part, but the investors appealed this decision, and MDS Law cross-appealed, arguing that the claims should have been struck out in full. The Court of Appeal allowed the appeal and dismissed the cross-appeal, holding that the claims should not have been struck out in part. The court held that it was possible for a solicitor to assume a duty of care to a non-client, and that the question of whether such a duty ought to be recognised should be answered against the full factual context supplied by a trial. The court also held that the limitation defence did not apply to the claims relating to the December 2006 payment, and that the appeal must be allowed and the pleading restored so far as it concerns that payment.

The Court of Appeal allowed the appeal and dismissed the cross-appeal. The fifth respondent, MDS Law, must pay the appellants one set of costs for a standard appeal on a band A basis, with provision for two counsel and usual disbursements. The decision of the High Court was set aside, and the matter was remitted to that court for further proceedings. The Court of Appeal held that the claims against MDS Law should not have been struck out in part, and that the limitation defence did not apply to the claims relating to the December 2006 payment. The court held that it was possible for a solicitor to assume a duty of care to a non-client, and that the question of whether such a duty ought to be recognised should be answered against the full factual context supplied by a trial. The court also held that the issue of whether the appellants were eligible investors was a question of fact that should be determined at trial. The decision of the Court of Appeal is significant because it recognises the potential for a solicitor to owe a duty of care to a non-client in certain circumstances, and it highlights the importance of considering the full factual context when determining whether such a duty ought to be recognised.

Orders